The below is an excerpt from a recently published report by PwC, titled ‘So much in store: Prospects in the retail and consumer goods sector in ten sub-Saharan countries’. An overview of the report’s findings can be read here.
Interview: Boulos Boulos, Chief Executive Officer, Boulos Group Nigeria
Boulos Foods and Beverages was established in 2012 in Ibadan, Nigeria, and is part of the Boulos Group Nigeria, which has interests in tissue paper recycling and conversion as well as automotive assembly.
Are you seeing evidence of a growing middle class?
The number of Nigerians who are shopping in modern trading environments has definitely grown over the past ten years. This is partly a consequence of the growth of telecoms, banking and other sectors, which have attracted large numbers of Nigerian professionals and their families from abroad to live and work in Nigeria. This is driving the growth of a middle class.
At one time, 100% of Nigerian shoppers shopped at open markets. Today, we have noticed that 10% of consumer trading is in modern outlets. In the next ten years, we expect that this will comprise 25-30% of consumers. Wealthy people are starting to do their own shopping now that they have more upmarket places to shop.
However, the masses are still shopping at open markets, where many of them buy in bulk.
Our company makes goods for different segments of the market to cater for changing tastes in terms of its tissue products. The demand for the high-end products is much lower than for the middle- or lower-segment products. But even low-income consumers are demanding better quality in consumer goods. There is huge competition in packaging as a result.
Are consumers moving increasingly to local products?
Most people still have more trust in international brands, mostly western brands and to a lesser extent those from Asia, because they associate this with better quality. But this is starting to change, and local manufacturers are benefiting from local messaging and the improved quality of their goods.
People at the mass-market end of the spectrum are particularly price sensitive, but it is not just them. Price sensitivity also exists in the middle- and upper- income groups. People want quality for their money and if they can afford it, they are willing to pay extra for guaranteed quality.
What are the main challenges you face in Nigeria?
The supply chain is a challenge and the biggest problem by far is the port. Any company that relies on imports is held hostage by the ports authority, as it can take one or even two months to get the goods through.
A more recent challenge has been sourcing foreign exchange to pay for imported goods and inputs. With the rapid devaluation of the currency in 2014 and 2015, foreign exchange is getting harder and harder to access.
Sourcing raw materials for foodstuffs is also difficult. Although there have been some improvements in agriculture, finding food in bulk is almost impossible and there is still a reliance on imports for products from tomatoes to milk.
The cost of energy is high and can be up to 10% of the total cost of manufacturing. Another issue is the cost of labour. The trade unions have been pushing up labour costs over the years, but productivity among unskilled or low-skills workers is often very low. However, it is getting easier to find qualified middle and executive management locally than it was ten years ago.